Agencies must respond to rise of procurement

LONDON: Agencies need to modify their outlook and working practices if they are to successfully respond to the growing importance of procurement departments in almost every aspect of marketing.

Richard Woodford, category manager of advertising and marketing at News International, said the downturn had helped to encourage negative views of procurement among agencies.

"At the moment getting good creative is really tough. There's a very risk-averse culture in companies due to the highly volatile economic climate," he argued.

"Procurement these days often involves bearing bad news about budgets being slashed, but that is not our decision or what we want and, in many cases, agencies shoot the messenger."

Despite this, Woodford warned that it was up to the members of the communications industry to adopt a proactive approach to proving their worth.

"In many ways agencies should be trying harder to impress clients and come up with really insightful, creative work. They need to stop bleating and get on with it."

Umbrella, a promotions agency, has worked with Unilever in the UK to ensure the company's discount activity is based on striking executions and thorough forecasting and measurement.

"This removes the fear of the unknown - a reason that brand teams can be more inclined to reject a wild and wacky creative concept," Beth Johnson, Umbrella's founder, said.

"It's a daunting prospect for brand managers to run a new campaign without any historical redemption figures and that's where we come in."

According to Andrea Bottke, the purchasing manager for Danone, the principal goal at the heart of procurement is not financial, but is instead centred on driving results.

"To secure creativity, you need to have the best people working on your account. To get this right it is important to understand what motivates an agency and it's not necessarily just money," she said.

More specifically, Bottke suggested that value-based payment structures – as currently being rolled out by Procter & Gamble and Coca-Cola – would come to play a vital role in this process.

"Why should an agency with a fixed fee give you the best resource? They would rather put it toward a new account, to increase revenue," she argued.

"However, if they know that they have to be excellent and can earn more money on your account, they will make sure they have their best talent available."

Such a shift may not be easy to achieve, as it will require a change in culture and establishing targets that are agreed upon by both sides.

Jim Houghton, previously a director at Omnicom and now of Results International, the consultancy, said a similar method to that used by "talent management" specialists like IMG could offer a way forward.

"For this model to work, agencies effectively need to be co-owners of the brands they work for," he said.

Anomaly, the multidisciplinary agency, has stated its intention to "fix" the "broken" remuneration system, seeking to share intellectual property with its clients.

Elsewhere, the Viral Factory, a digital specialist, only works for clients on a project basis, and charges a fee for pitches and all creative work in an effort to maintain motivation among its staff.